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                                                                    EXHIBIT 10.1

                          INTERSTATE BRANDS CORPORATION
                           INCENTIVE COMPENSATION PLAN
                         CORPORATE & DIVISION MANAGEMENT


1.       PURPOSE:

         The purpose of the Plan is to increase the profitability of the company
         by stimulating key executives to superior performance and by attracting
         and keeping in the employ of the company people of outstanding
         experience and ability. To these ends, the Plan provides a means of
         rewarding those who contribute most to the profitability of the
         company.

2.       DEFINITIONS:

<Table>
<S>                              <C>   <C>
         Company                 B     Interstate Brands Corporation (IBC)

         Plan                    B     The Annual Incentive Compensation Plan
                                       for the Company.

         Plan Year               B     Each fiscal year for which the Plan is
                                       authorized.

         Compensation Committee  B     The committee authorized by the Board of
                                       Directors of the Company to administer
                                       the Plan.
</Table>

3.       ELIGIBILITY OF EMPLOYEES:

         Employees eligible to participate in the Plan in any Plan Year (the
         "Participants") will be limited to a select group of corporate and
         divisional management employees who are recommended by IBC's Chief
         Executive Officer and approved by the Compensation Committee. These
         positions include:

         o        Chief Executive Officer

         o        Direct Reports to Chief Executive Officer

         o        Key corporate and divisional employees who have a significant
                  impact on IBC's profits and strategic position.

4.       COMPANY PERFORMANCE TARGET:

         (a)      The standard used to determine corporate performance will be
                  Earnings Per Share. Eastern, Central and Western Division
                  performance will be determined by the respective division's
                  Operating Cash Flow.

         (b)      Minimum, target and maximum Earnings Per Share for the
                  corporation and Operating Cash Flow for each division will be
                  recommended by IBC's Chief Executive Officer and approved by
                  the Compensation Committee.


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         (c)      Earnings Per Share and Operating Cash Flow objectives will be
                  related to the company's business plans.

5.       INCENTIVE AWARD GUIDELINES:

         (a)      Target incentive amounts are the amounts that would be paid in
                  the event the performance of the company and divisions evenly
                  matched target Earnings Per Share or Operating Cash Flow.

         (b)      For the Chief Executive Officer and Chief Operating Officer,
                  the target incentive award will be determined by multiplying
                  the respective base salary amount by the appropriate incentive
                  award guideline percent.

                  The target incentive award for all other Participants will be
                  determined by multiplying the respective salary grade midpoint
                  by the appropriate incentive award guideline percent.

         (c)      Guideline incentive award percents will be as follows:

<Table>
<Caption>
                                                                                GUIDELINE INCENTIVE AWARD
        EXECUTIVE MANAGEMENT                                                           PERCENTAGE
        --------------------                                                    -------------------------
<S>                                                                             <C>
        Chief Executive Officer                                                            70%
        Chief Operating Officer                                                            55%
        Executive Vice Presidents                                                          50%
        Senior Vice Presidents                                                             45%
        Vice Presidents                                                                    40%

        SALARY GRADES
        20                                                                                 45%
        19                                                                                 40%
        16, 17 and 18                                                                      35%
        13, 14 and 15                                                                      30%
        11 and 12                                                                          20%
</Table>

6.       DETERMINATION OF INDIVIDUAL INCENTIVES:

         (a)      Each Plan Year in which IBC's actual corporate Earnings Per
                  Share/divisional Operating Cash Flow equals or exceeds the
                  applicable minimum level established by the Compensation
                  Committee, Participants will be paid an incentive equal to the
                  product of their respective target incentive and the
                  applicable achievement factor for the Corporation and
                  Divisions.

<Table>
<Caption>
              LEVEL OF TARGET EARNINGS PER SHARE/
                  OPERATING CASH FLOW ACHIEVED                                  CORPORATE/DIVISION
              -----------------------------------                               ------------------
<S>                                                                             <C>
                            Minimum                                                     50%
                             Target                                                    100%
                            Maximum                                                    200%
</Table>



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                  Earnings Per Share/Operating Cash Flow achievement factors
                  will be interpolated when achievement is between minimum and
                  maximum.

         (b)      Earnings Per Share as provided in the Company's financial
                  statement. Operating Cash Flow will be defined as earnings
                  before interest and taxes (EBIT) plus depreciation and
                  amortization. EBIT will be calculated before extraordinary
                  items and adjustments, but after accruals for annual incentive
                  awards.

7.       DISCRETIONARY AWARDS:

         The Chief Executive Officer may on an annual basis establish a
         discretionary pool for special payments as the result of circumstances
         which occur during the Plan Year. Such discretionary pool is subject to
         the approval of the Compensation Committee.

8.       PAYMENT OF BONUS AWARDS:

         (a)      Bonus awards will become payable promptly after the close of
                  the Plan Year.

         (b)      Bonus awards will be paid in cash, except when otherwise
                  authorized by the Compensation Committee.

         (c)      To receive payment of a bonus award, a Participant must be a
                  full-time employee of IBC at the end of the Plan Year, except
                  in the event of retirement, permanent disability or death of a
                  Participant or sale of substantially all of the assets of IBC
                  or other conditions which are hereinafter provided for in (i),
                  (ii), (iii), (iv), (v) and (vi).

                  If a Participant is not a full-time employee at the end of the
                  Plan Year, the Participant's right to receive a bonus award
                  shall terminate.

                  (i)      In the case of retirement or permanent disability of
                           a Participant in a Plan Year, a pro-rata share (to
                           date of retirement or permanent disability) of the
                           bonus award for that Plan Year shall be awarded.

                  (ii)     In case of death of a Participant in a Plan Year, a
                           pro-rata share (to date of death) of the bonus award
                           for that Plan Year shall be paid to his legal
                           representative at the close of the Plan Year.

                  (iii)    In the case of sale of substantially all of the
                           assets of IBC, an individual plant or plant closure
                           in a Plan Year, a pro-rata share (to date of
                           divesture) of the bonus award for that Plan Year
                           shall be awarded at the close of the Plan Year.

                  (iv)     In the case of an employee who has been hired or
                           promoted to an eligible position in a Plan Year, a
                           pro-rata share (from date of entry in the eligible
                           position) of the bonus award for that Plan Year shall
                           be awarded.



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                  (v)      In the case of a Participant who has been transferred
                           to an ineligible position during the Plan Year due to
                           an organizational change, a pro-rata share (to date
                           of transfer to ineligible position) of the bonus
                           award for that Plan Year shall be awarded.

                  (vi)     In the case of a Participant who has been transferred
                           between eligible positions during the Plan Year due,
                           a proration shall be made based on the respective
                           criteria for each position for that Plan Year.

9.       POLICY STATEMENT:

         Eligibility for participation in the Plan will be determined on
         consistent and equitable basis.

10.      ADMINISTRATION:

         (a)      This Plan has been adopted by the Board of Directors of IBC
                  and may be amended, from time to time, in any respect, by such
                  Board. Any such amendment may add to, amend, reduce, or cancel
                  any and all rights with regard to the Incentive Compensation
                  Plan.

         (b)      The Compensation Committee shall interpret the Plan and make
                  all determinations necessary or desirable for its
                  administration.

         (c)      The decision of the Compensation Committee on any questions
                  concerning the interpretation or administration of the Plan
                  will be final and conclusive. Nothing in the Plan will be
                  deemed to give any officer or employee, his legal
                  representatives or assigns any right to participate in the
                  Plan or in any payment under the Plan except to such extent,
                  if any, as the Compensation Committee may determine pursuant
                  to the provisions of the Plan.

         (d)      This Plan may be terminated at any time by the Board of
                  Directors of IBC. Upon such termination, all rights or a
                  Participant to amounts not apportioned among the Participants
                  shall become null and void. However, amount previously awarded
                  but unpaid as of the date of termination shall not be
                  affected.

         (e)      This Plan and all rights thereunder shall be subject to and
                  interpreted by any and all governmental laws, regulations and
                  approvals that may exist from time to time.

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